New analysis shows NEG is worse than doing nothing

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New analysis suggests the targets contained in the National Energy Guarantee are actually worse than if the government did nothing.

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New modelling by energy market analysts RepuTex has added to the deepening concern about the proposed National Energy Guarantee, suggesting it is calibrated to achieve an outcome that is worse than doing nothing.

The RepuTex analysis builds on concerns that the modelling used to underpin support for the NEG made a complete hash of estimating what would happen if no policy was in place.

It finds that the “do nothing” scenario still results in a 29 per cent cut in emissions by 2030 – more than the 19 per cent assumed by the Energy Security Board and more than the 26 per cent targeted under the NEG.

That means that the NEG would provide no incentive for any new investment in renewable energy.

Reputex says the analysis commissioned by ESB ignored two key schemes.

One was rooftop solar, and the SRES scheme that supports it. Rooftop solar is currently being installed at record rates of more than 1GW a year as households and businesses respond to soaring grid prices.

And it also appears to have ignored – apart from some initial auctions already in place – the legislated 40 per cent renewable energy target in Victoria by 2025, and the 50 per cent target in Queensland by 2030.

That amounts to a total of 8GW of capacity that has been effectively ignored by the ESB analysis.

It means that the ESB’s claims that the NEG would lift investment in renewables to 36 per cent of total production from 31 per cent under business as usual are wrong.

Reputex says business as usual would be 40 per cent.

Perhaps the only explanation for the Coalition’s omission of this capacity is their assumption that the state-based schemes will be repealed, as it and ESB chair Kerry Schott are calling for, and that the SRES will be dumped or scaled back.

In the same way, the renewables that the ESB forgot would contribute to emissions from Australia’s electricity sector falling around 29 per cent in the “do nothing” scenario – because of the state schemes and the uptake of rooftop solar.

The NEG is designed to achieved a reduction of 26 per cent. It claimed the do-nothing scenario would result in only a 19 per cent fall in emissions from the electricity sector.

“This raises questions over the design of the NEG, with a ‘do nothing’ scenario already projected to be more ambitious than the government’s emissions target, rendering the new policy immaterial to the market,” Reputex says in its report.

“As currently designed, the NEG is therefore likely to have negligible impact on the market, with current state policy the dominant driver of new renewables build.

“Unless the emissions target embedded within the NEG exceeds where emissions will be under a ‘do nothing’ scenario – i.e. at least a 30 per cent reduction below 2005 levels by 2030 – there is little need for the administrative complexity of the emissions guarantee, or any reliability mechanism.”

Indeed, it could and should be argued that if the NEG was to achieve anything at all, then the emissions target should be significantly higher. That was certainly the overwhelming view of nearly all the submissions made to the ESB – from Origin Energy all the way down to the smallest retailer.

The submissions filed over the last week point to myriad dangers of the policy:

  • That is is hopelessly inadequate on emissions
  • That it will eliminate competition and push up prices
  • That it eoes not address reliability and may in fact delay investment in battery storage and pumped hydro (say Genex and Tesla).
  • Will provide no incentive for any new investment for large scale wind and solar.
  • Is unnecessarily complex.

Reputex is not the only company to say that the NEG delivers worse than business as usual. Gordon Weiss, from Energetics, a widely respected consultancy firm, argued the same case in the first of a three part series on Friday.

“Unless the target is more ambitious than where emissions are projected to be without the NEG, there is little need for the administrative complexity of the scheme”, Reputex says.

 

 

It says that if state-based scheme continue – contrary to the wishes of the Coalition government and the ESB chair – then an “arms race” between the states for renewable investment would take place. NSW, which has no state-based target, risks being left behind.

 

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11 Comments
  1. neroden 8 months ago

    Two points:
    (1) Does Australia have a mechanism for suing in court to stop policies which have no rational basis whatsoever? (The US does.)

    (2) If the COALition attack on renewables through the NEG continues, it seems that going off the grid will be the preferred and generally-chosen option nationwide.

    • Hettie 8 months ago

      You can bet that if it does now, the minute anyone tries it, the feds will legislate to prevent it. Such occasions are the only times this mob has been seen to act fast.

  2. Dee Vee 8 months ago

    typical media beatup. the NEG is about securing reliable cheap power, not about emissions reductions.

    • JIm 8 months ago

      Rhetorically at least it is about emissions reduction, affordability and reliability – Finkel’s trifecta.

    • Peter F 8 months ago

      Except that restricting investment in new generation will increase price and reduce reliability. New wind is cheaper than new coal and cheaper than existing gas so how can restricting new generation lower prices

    • Hettie 8 months ago

      Er, no. The NEG is about protecting the coal and to a lesser extent gas incumbents, and making things as difficult as possible for renewables. The reliability measures have been shown to save at best
      2 seconds that is not a typo, 2 seconds of blackouts a year. Whacko!
      The growth of renewables, especially solar and the HPR, are putting downward pressure on power prices, because demand peaks on hot summer afternoons, and that is when solar is jumping. Battery uptake also helps smooth the ongoing evening demand, while HPR shoots a few megawatts into the grid when a coal clunker clunks out. Which they do with increasing frequency.
      So NEG will push prices and pollution up and do a bg fat diddly squat zero for reliability.
      Fail on all three objectives.
      Epic fail.

      • Greg Hudson 8 months ago

        ”The NEG is about protecting the coal and to a lesser extent gas incumbents”
        G’Day Hettie. I think you misunderstood Dee Vee… he said exactly the same thing… ”reliable cheap power, not about emissions reductions”
        Looks and sounds like a pro coal, FF lobbyist to me (IMO)

        • Hettie 8 months ago

          I don’t see how you can say that “protecting coal”, (which will keep power prices high) and “securing reliable cheap power ” are the same thing. They are diametrically opposed to each other.
          The NEG, although touted to secure reliable cheap power, can do no such thing. It is designed by coal aficionados to protect coal at the expense of renewables, in defiance of all the evidence that renewable are cheaper now than coal, and getting cheaper while coal and its assaciated costs continue to get more expensive.

          • Greg Hudson 8 months ago

            Hettie, I didn’t say it, Dee Vee said it. I just quoted his bullshit…
            And added IMO he sounds like a pro coal FF lobbyist. You seem to have missed my point). However I agree with you.

  3. BilB 7 months ago

    This policy is a National Energy Failure Guarantee (NEFG). It is also a failure of government. Such policies can only thrive in isolation from communication with the public.

    Arctic climate in collapse.
    Antarctic ice now demonstrated to be melting at a huge pace.
    Arctic permafrost in collapse.
    Days of above zero temperatures mid winter in Arctic
    Atlantic conveyor current slowing causing changes to the number and path of Atlantic hurricanes and the nature of storms across Europe.
    Barrier Reef doomed.
    Australian seasons changing towards a no Winter climate with huge impacts on agriculture and communities from heat stress
    CO2 level steadily rising
    Sea levels rising at an increased rate.
    Countries destabalising

    For a government to do nothing as the environment changes to this degree is criminal.

  4. BilB 7 months ago

    Dee Vee, Turnbull’s policy cannot possibly deliver “cheap power”, and the reason is simply that the contracted margins have changed to make that impossible. The “distribution” share of the revenue carve up was changed from one third to one half (primarily due to Abbott’s obstruction tactics) meaning that the production share of the retail price is much smaler and so any change, even if TurnBull’s NEG did deliver lower energy production costs (actually not possible), their impact would be substantially marginal. You have swallowed the con hook line and sinker.

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